Industrial Hemp: On the Brink of Legalization

After a lengthy compromise process, The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) was passed on December 12, 2018 by Congress and delivered to the White House for the President to sign. The 2018 Farm Bill will replace the Agriculture Improvement Act of 2014, which expired on September 30, 2018. Distributing more than $850 billion, the 2018 Farm Bill is an enormous piece of legislation and funds programs such as crop insurance, school lunches, and the Supplemental Nutrition Assistance Program (SNAP).

Integrated into the massive omnibus Farm Bill is the bipartisan Hemp Farming Act of 2018, spearheaded by Senator Mitch McConnell. The Hemp Farming Act will legalize at the federal level the production of industrial hemp, defined as Cannabis sativa L. plants containing less than three-tenths of a percent of THC, the intoxicating chemical in marijuana. The low concentration of THC makes these plants unsuitable for marijuana production, which remains federally illegal.

First and foremost, the 2018 Farm Bill will abolish this inconsistent treatment by removing industrial hemp from the definition of “marihuana” in the Controlled Substances Act (CSA). In addition, tetrahydrocannabinols contained in industrial hemp will be removed from the purview of the CSA. This amendment to the CSA will decriminalize the production and use of the Cannabis sativa L. plant and its derived products that match the definition of industrial hemp, such as hemp seed oil, CBD oil, hemp fibers and hemp paper.

The 2018 Farm Bill will also amend the Agricultural Marketing Act of 1946 (AMA), 7 U.S.C. § 1621 et seq., to include industrial hemp. The AMA directs and authorizes the Secretary of Agriculture to carry out programs to assist the production, transportation and marketing of crops. When the amendment takes effect, hemp will be treated the same as any other legal crop by the Department of Agriculture.

Industrial hemp will not be entirely unregulated, however. As part of the amendment to the AMA, State and Tribal governments will be able to create regulatory plans for the production of industrial hemp. Those plans must include: (1) a practice to record and describe land on which hemp is grown; (2) a procedure for testing the concentration of THC; (3) a procedure for disposal of noncompliant products; and (4) a procedure for enforcing the regulations. Otherwise, the plan may include anything that does not otherwise conflict with federal regulations.

Enforcement requirements under the newly revised AMA are significantly reduced from the previous penalties under the CSA. The 2018 Farm Bill differentiates between negligent violations and violations with a higher mental state (i.e., reckless, knowing, or intentional). Negligent violations comprise: (1) failing to fully describe production land to the regulating authority; (2) failing to obtain a license from the regulating authority; and (3) producing products containing more than 0.3 percent THC. The AMA prescribes the only penalties for negligent violations and forbids criminal penalties: the producer must comply with a plan made by the regulating authority to cure the violation, which includes a reasonable date for curing the violation and a requirement to periodically report on the producer’s compliance to the regulating authority. Three negligent violations in a five-year period will result in a suspension of a producer’s license to grow hemp for five years.

Reckless, knowing, and intentional violations of the regulations will result in criminal penalties according to the laws of the State and the laws of the federal government.

Several laws will be amended to allow for research on hemp products after decades of prohibition. The National Agricultural Research, Extension, and Teaching Policy Act of 1977, 7 U.S.C. § 3319d(c)(3)(E), and the Critical Agricultural Materials Act, 7 U.S.C. § 178c(b)(9), will both have industrial hemp added to their covered products. As a provision of the 2018 Farm Bill itself, the Secretary of Agriculture will be required to commence an economic viability study of hemp and submit a report on the results of the study to Congress within 120 days of the 2018 Farm Bill’s enactment.

Hemp will also be added to the crops qualifying for federal crop insurance. The Federal Crop Insurance Act, 7 U.S.C. § 1502 et seq., will be amended to include hemp in the covered crops. In addition, the “viability and marketability” requirements for crop insurance, both for production and for research, may be waived at the discretion of the Federal Crop Insurance Corporation.

Once President Trump signs the 2018 Farm Bill into law, industrial hemp and its derived products will be legal on a federal level, and the states may choose for themselves how to move forward in this exciting new industry.

A corporate transactional attorney by trade, Steve transferred his skills from mergers and acquisitions to the hospitality industry – and eventually to cannabis. Since 2010, Steve’s major focus has been on the burgeoning cannabis industry, where he guides clients through the tangle of shifting regulations governing the sale and use of cannabis in both the marijuana and industrial hemp sectors. He leads the firm’s cannabis practice in both Colorado and California.

Benjamin admires the entrepreneurial spirit of the clients he helps in his corporate cannabis law practice. Benjamin’s practice involves working with clients starting new businesses, assisting businesses as they grow and generally helping build Colorado’s cannabis industry.

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